The calculation is correct. The purpose is to return one initial so that the person can be grouped according to the data available. If there is a Last Name available (the first choice in the Case statement), the first letter of the last name is returned. If there is a First Name with no Last Name (the second choice in the Case statement), then the first letter of the First Name is returned. Finally, if there is only a Company name, the first letter of it is returned. A Case statement stops after the first "true" is returned.

The key thing to remember is that it is named "Initial" - not "Initials" so it is meant to only return 1 letter. It is used in the list views to group the records by letter in an alpha listing. That field is used as the sub-summary break field.